The Impact of Innovation Practices

What is the role of innovation in the success of organizations? What are the strategic choices made? What impact does have innovation practices? How do innovation targets affect the development of practices and techniques implemented? Does focusing on improving current activities or developing future activities ultimately play a key role in developing practices and impacts?

These are some of the questions we asked ourselves when we began our study of innovation practices.

We wanted to draw a portrait of innovation practices within organizations in addition to highlighting the factors that influence them. Over 100 senior executives and managers of businesses of all sizes and industries working in Canada and abroad collaborated on this study. Here are some of the key elements addressed.

2018 Innovation Practices Study – Highlights

74% of respondents believe their organization has met or exceeded management’s expectations;

89% felt that a wide knowledge of client profiles was an important opportunity for their organization;

75% of respondents rate innovation initiatives introduced in the past 3 years as having a moderate or strong influence on the success of their organization;

91% consider the availability of human resources as an important barrier to innovation;

33% of respondents indicated that the innovation effort was deployed under a distinct program reporting to senior management;

25% (less than) believe that their organization uses techniques and methods specifically designed for innovation;

4.6X – Respondents whose organization focuses their efforts on the development of future activities are 4.6X more likely to perceive their organization as being much more capable of innovating than the competition.

Defining innovation

An innovation must be desirable, viable and feasible (Tim Brown, 2009). Innovation can take different forms and serve different purposes. It can be incremental, evolutionary or radical. Also, it can be simple or complex depending on the number of elements at its base (for more details on the definition of innovation, see “Innovation as a growth engine”).

As part of our study of innovation practices, we noted that the majority of respondents said that their organizations primarily focused on product development and optimization of day-to-day operations as key innovation strategies. These choices, while showing benefits, expose organizations to risks.

Opportunities and threats

Innovation is now a must for any company that wants to ensure its sustainability. According to a recent analysis published by Innosight, the service life of companies listed on the S&P 500 index has decreased from an average of 33 years (1964) to 24 years (2016). It is projected that it will be only 12 years by 2027.

While respondents give a rather positive picture of the environment in which their organization operates, 82% believe that entry of new competitors offering lower priced products and services is a significant threat.

What is paradoxical is that while 90% of the respondents recognize the urgency of responding to these threats, they claim to require 1 to 5 years to respond. Reaction time is in itself a significant threat.

Capacity to innovate and obstacles to innovation

Although 75% of respondents say that innovation has “moderately or strongly” influenced the success of their organization, it is interesting to see how the industry sector affects the innovation capacity of organizations.

The majority of respondents mentioned that their organization is more capable of innovating than the competition. Note, however, that the manufacturing and professional services sectors have the lowest rates of innovation capacity.

The main barriers limiting the ability to innovate are the availability of human resources and the lack of internal skills. They come respectively in 1st and 3rd positions. The fact that resources are already occupied in daily operations is a “moderate” or “very important” barrier for 91% of respondents.

Implementing innovation

The different variables studied in relation to the use of innovation implementation approaches show that the potential is not fully exploited.

Whether through the assignment of human resources, the definition of measures and targets or the organization of the program, it appears that organizations have not yet developed a robust innovation process or culture of innovation.

When we look at the use of techniques and methodologies used by the organizations surveyed, it appears that brainstorming and customer needs observation/identification are relatively well used (69% and 68% respectively).

However, techniques and methodologies more aligned with innovation are not exploited. Although Design Thinking, Business Model Innovation, and Lean Startup techniques can support the entire innovation process from ideas to market, none of them are “often or systematically” used by more than 24% of organizations.

In a context of evolutionary innovation or radical innovation, these techniques reduce the risk of misguided large-scale marketing efforts which could be disappointing.

The importance of the duality of innovation

Organizations can innovate by selecting different targets. These targets coexist and their prioritization guides the approaches, techniques, and methodologies implemented.

Whether they focus on optimizing current activities or identifying and developing future activities, organizations cannot avoid the cohabitation, the duality of these two targets. Depending on its strategic choices, an organization may focus on one or the other of these targets.

Our study tends to show that the choice of targets affects the robustness of the innovation process and the resulting success. Note also that it is possible to observe different innovation targets by industry sector.

Targets of innovation and success

Organizations that focus on identifying and developing future activities seem to be gaining an undeniable advantage. Respondents are more likely to rate the success of their organization as being significantly higher than expected (2.3X). They are also 3X more likely to rate the growth potential as being very strong compared to those whose organization focuses on the improvement and optimization of current activities.

They also say that innovation has a very strong influence on the success of their organization (2.6X) and they consider that the latter is much more capable of innovating than their competition (4.6X).

These observations are equally valid for attributes that reflect more robust innovation practices, different innovation approaches, or the choice of techniques and methodologies used.

Conclusion

Our report on innovation practices has highlighted not only the role of innovation in the success of organizations but above all, the strategic choices of targets in the development of practices and techniques implemented.

For this reason, it is more than necessary to frame innovation in its strategic role. Effective implementation of innovation requires not only the use of appropriate methodologies but also a context that facilitates its deployment. The development of a culture conducive to experimentation and the protection of resources dedicated to innovation are two key elements.